Harmonized Sales Tax

[lordmandeep]

They better not do the tax on tax in Quebec.


I was about to yell at the retail guy in Quebec that he was trying to scam me.

I bought something for $100 it should be at most 114.50 (a few years back) but i was $115.03

 

[nfitz]

One thing that McGuinty needs to keep in mind, that although this might save business a lot of money, he is not elected by business, but by individuals, who will likely revolt, unless a very clear case for this is presented, or rates are adjusted somehow.

I'd think that the combination of creating an HST and and dropping provincial rates to 5% for an HST of 10% would sell.

And even an HST of 13%, where the rate was kept at 5% on items currently exempted from PST would sell.

But if Ontario has the HST at 13% and expands the tax to everything currently taxed under GST then McGuinty might be wise to remember that Brian Mulroney's reward for converting the old 13.5% MST into the 7% GST (even though it created some notable savings on some items) was having his majority government decimated, and winning only 2 seats in the next election.

If McGuinty is so interested in tax reform, perhaps he could look at the current Ontario income tax brackets; currently 6.05%, 9.15%, and 11.16%. Surely it would make filling in the forms easier if it could simply be converted to 6%, 9%, and 11%; I don't know how many times I type 0.0605 into a calculator or spreadsheet when doing my taxes ...

 

[LisainToronto]

If the province goes ahead with this they should also increase the PST by 1% ... replacing the 1% give away by the conservatives.

 

[Roy G Biv]

McGuinty to Harmonize GST and PST

http://www.cbc.ca/canada/toronto/story/2009/03/25/ontario-budget.html

The Ontario Liberal government is expected to introduce harmonization of the province's sales tax with the GST in its budget on Thursday to ease costs for struggling businesses and stimulate the province's sagging economy during the global recession.

Opposition and business leaders have long pushed for the measure, arguing the province's corporate taxes are too high, hinder investment and make the province less competitive.

As someone who makes PST-exempt sales, I'm hating this.

What will this do to the RE market? Won't broker fees increase by 8%?

 

[Glen]

The gain from taxing services (ie. your hair cut, or the plumber's labour) is far less than the loss from not taxing goods which go into business inputs.

Business inputs are already PST exempt.

 

[Glen]

spider, it's much bigger than you or a few million dollars in marginal tax revenue. Harmonization will help our manufacturing and export sectors by eliminating additional tax at each step in the value chain. As you noted, exports are GST exempt, and harmonization would make them PST exempt.

In other words, don't bitch about the GST. It's a great tax. If you have to pay tax, you want to pay that one and not income taxes, property taxes, etc.

I agree completely.

I thought that Harper would have been far better off skipping the GST cuts and should have increased the Basic exemption instead.

 

[spider]

McGuinty to integrate taxes

Bend over, get a good grip on your ankles and think of England.

 

[nfitz]

Heck, the sales tax is only 15% in England (temporarily down from 17.5% because of the economic crisis) and one of the lowest in Europe. Think of Denmark, Norway, or Sweden - it's 25% there!

 

[kEiThZ]

It'll be big news for a week or two. Most people won't notice a merged sales tax in their day to day dealings. Is someone really going to vote differently now that their trip to Chapters costs more? The only liabilities I see are parents (diapers!) and new home buyers. The latter is the most pressing of the bunch. And there are work arounds for it (rebates).

Most estimates say that the average Ontarian will spend 70 dollars more. Yeah, not something most would notice I think.

 

[Hydrogen]

Let's remember that certain items would still be exempted from both taxes. It's too easy to jump the gun at this point.

 

[kEiThZ]

It'll be interesting to see how McGuinty sells it and how the opposition reacts. I am curious to see how the leader-less tories react to this. It's a great fiscally conservative idea and one the whigs are working with the federal tories on.

 

[lordmandeep]

Many items currently exempt from the eight per cent provincial sales tax -- diapers, children's clothes and shoes, books, feminine hygiene products and new homes priced under $400,000 -- will maintain the exemption, the sources said.

http://www.cp24.com/servlet/an/local/CTVNews/20090325/090325_taxes/20090325/?hub=CP24Home


I do not understand why Harmonizing will lead to the tax on tax effect or compounding effect. You know 5% on X amount and then 8% on 1.05X..

Why not simply 13% of x amount.

It better be the simplier form or else I may reconsider Mcgunity. However the problem in Ontario and a funny one is who the else is there.

The Tories, the NDP...

 

[Whoaccio]

It'll be interesting to see how McGuinty sells it and how the opposition reacts. I am curious to see how the leader-less tories react to this. It's a great fiscally conservative idea and one the whigs are working with the federal tories on.

Maybe my memory is drying up, but I swear I remember Flaherty deploring McGuinty's failure to implement an HST a few year ago and all the CPC lemmings running of a cliff deriding the baby-eating-tax-and-spend-not-harmonized-sales-tax-satan McGuinty.

I've never understood why VATs were so unpopular in Canada. I think it is fair to say that there is a fairly strong consensus that VATs are more efficient means of taxation than income. But VATs almost elicit the mob with pitchforks phenomenon.

 

[lordmandeep]

I am bit confused.

What is the difference between VAT and a sales tax???

 

[Whoaccio]

VAT (in Canada's case, the GST) is levied on added value whereas sales taxes (like the PST) are levied on the total value of a transaction. Just quoting from Wiki

With a North American (Canadian provincial and U.S. state) sales tax
With a 10% sales tax:
The manufacturer pays $1.00 for the raw materials, certifying it is not a final consumer.
The manufacturer charges the retailer $1.20, checking that the retailer is not a consumer, leaving the same profit of $0.20.
The retailer charges the consumer $1.65 ($1.50 + $1.50x10%) and pays the government $0.15, leaving the same profit of $0.30.

So the consumer has paid 10% ($0.15) extra, compared to the no taxation scheme, and the government has collected this amount in taxation. The retailers have not lost anything directly to the tax, and retailers have the extra paperwork to do so that they correctly pass on to the government the sales tax they collect. Suppliers and manufacturers have the administrative burden of supplying correct certifications, and checking that their customers (retailers) aren't consumers.

With a value added tax
With a 10% VAT:
The manufacturer pays $1.10 ($1 + $1x10%) for the raw materials, and the seller of the raw materials pays the government $0.10.
The manufacturer charges the retailer $1.32 ($1.20 + $1.20x10%) and pays the government $0.02 ($0.12 minus $0.10), leaving the same profit of $0.20.
The retailer charges the consumer $1.65 ($1.50 + $1.50x10%) and pays the government $0.03 ($0.15 minus $0.12), leaving the profit of $0.30 (1.65-1.32-.03).

So the consumer has paid 10% ($0.15) extra, compared to the no taxation scheme, and the government has collected this amount in taxation. The businesses have not lost anything directly to the tax. They do not need to request certifications from purchasers who are not end users, but they do have the extra accounting to do so that they correctly pass on to the government the difference between what they collect in VAT (output VAT, an 11th of their income) and what they spend in VAT (input VAT, an 11th of their expenditure).

EDIT: I just heard on the tube that McGuinty is going to make the merger more palatable by giving out a onetime cash payment of about $1,000. As much as I always like getting money in the mail, this is a horrible idea. The evidence is pretty clear that these rebates do little to help the economy, and if it just means loading on more red ink there is no point to it.